Fed Purchases $21.125BN Agency MBS in Week Ending July 22

The Federal Reserve today reported onrntheir weekly purchases of agency mortgage-backed securities (MBS). In the fiverntrading days between July 16 and July 22, the Federal Reserve purchased a grossrntotal of $21.245 billion agency MBS. During this period the Federal Reservernsold $120 million agency MBS, bringing their weekly net purchases total torn$21.125 billion.

Since the inception of the program thernFederal Reserve has spent $681.90 billion or 54.5% of the allocated $1.25rntrillion.

The goal of the Federal Reserve'srnagency MBS program is to provide support to mortgage and housing markets and tornfoster improved conditions in financial markets more generally. Only fixed-raternagency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae arerneligible assets for the program. The program includes, but is not limited to,rn30-year, 20-year and 15-year securities of these issuers.

Of the net $21.125 billion weeklyrnpurchases:

$525  million was used to buy 30 yr 4.0rnMBS coupons. 2.49%   of total weekly purchases.

$11.4 billion was used to buy 30 yrrn4.5 MBS coupons.  53.96% of total weekly purchases.

$6.75 billion was used to buy 30 yr 5.0rnMBS coupons.  31.95% of total weekly purchases.

$1.60 billion was used to buy 30 yr 5.5rnMBS coupons.  7.57%   of total weekly purchases.

$150 million was used to buy 15 yr 4.0rnMBS coupons. 0.71%   of total weekly purchases.

$700 million was used to buy 15 yr 4.5rnMBS coupons. 3.31%   of total weekly purchases.

The Fed's daily average of MBSrnpurchases was $4.225 billion per day, less than the previous week's average ofrn$4.4434 per day, but still more than enough to easily absorb originator supply between July 16 and Julyrn22. This implies the Federal Reserve continues to provide more than enoughrnliquidity to borrowers looking to purchase or refinance near record low rates.

Of particular note, in the previousrnreporting week the Federal Reserve's MBS purchases were concentrated in 4.5rncoupons (67% 4.5s vs. 25% 5.0s).  Howeverrnthis week the Fed purchased slightly less 4.5 coupons and a few more 5.0 coupons (54% 4.5s vs. 32% 5.0s). Thisrnillustrates how originator MBS supply selling correlates to mortgage rates. Asrnthe Fed's concentration of purchases shifts towards higher MBS coupons,rnmortgage rates increase. This in line with the Freddie Mac rate survey whichrnindicated that, in the week ending July 23, 30 year conventional mortgage ratesrnrose bnsix basis points to 5.20% fromrn5.14%. READ MORE

Here is a chart illustrating thernevolution of the Federal Reserve's Agency MBS Purchase Program…

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